Higher ethanol duty will not cause sharp hike in Europe prices

14 March 2012 21:18[Source: ICIS news]

ROTTERDAM (ICIS)--Domestic prices for European ethanol should not increase sharply or suddenly because of the introduction of EU legislation, which would increase import tariffs of fuel ethanol blends of 70% and higher, sources said on Wednesday.

For the past year, imports of ethanol blends of 90% (E90) have been flowing into the European market, benefitting from a loophole in the EU import tariff legislation.

E90 was classified as a chemical by some member states, allowing it to enjoy a percentage-based import duty of 6.5%, making it an attractive purchase for some buyers.

However, the industry argued that E90 was undercutting European producers and should be classified as denatured ethanol. This would subject E90 to a standard duty of €102/cubic metre (cbm).

The new legislation will be enforced from 2 April onwards, although its effects are unlikely to be experienced in the market until June at the earliest, as the remaining volumes disappear from the market.

Prices for European T2 fuel ethanol increased to €575-585/cbm FOB (free on board) Rotterdam this week, rising by €5-10/cbm.

“I don’t see the market going up. Demand is bad and there is plenty of product around,” one source said.

In addition, there are new ethanol capacities due to start up in Europe this year which, sources say, will curb any significant increases.

Vivergo’s biorefinery at Hull, in the UK, will produce 420m litres/year and is already commissioning product, according to sources.

According to sources, the Pannonia plant in Dunafoldvar, Hungary, is also due to start up during 2012 and will produce 240m litres/year of ethanol.